On July 31, shares of Strategy experienced a decline of 4.56%, closing at $93.28 after the company revealed a quarterly loss of $8.22 billion, prioritizing the restoration of its STRC preferred stock to its $100 par value.
Summary
- Strategy stock closed at $93.28, approaching its lower Bollinger Band, which is at $90.31.
- The company reported an $8.22 billion net loss, following an $8.32 billion unrealized loss on Bitcoin.
- Michael Saylor indicated that Strategy will balance cash and Bitcoin, instead of channeling all funds immediately into BTC.
- Analysts from Benchmark and H.C. Wainwright reaffirmed their buy ratings despite the stock’s downturn.
Strategy stock falls after $8.22B quarterly loss
Strategy stock fell to a low of $89.21 on Thursday before recovering to a close at $93.28. This 4.56% decrease marks the first time since July 1 that the Nasdaq-listed company traded below $90.
This drop came on the heels of Strategy’s second-quarter results, which included an $8.32 billion unrealized loss on Bitcoin. Thus, the company reported a net loss of $8.22 billion, translating to $24.45 per share for the quarter.
At the end of the reporting period, Strategy possessed 843,775 BTC—an increase of 25% since the start of the year. The acquisition cost for these assets was approximately $63.69 billion, averaging $75,476 per coin.
With lower Bitcoin prices, the market value of these assets was reduced to around $54.77 billion. According to fair-value accounting rules, variations in Bitcoin’s market price are reflected in Strategy’s earnings, contributing to significant fluctuations in quarterly results.
On a positive note, operating revenue increased by 6.9%, from $114.5 million in the same period last year to $122.4 million.
Why Strategy is prioritizing STRC over immediate Bitcoin acquisitions
During the earnings call, Executive Chairman Michael Saylor explained that Strategy aims to pivot away from allocating all available resources towards immediate Bitcoin purchases, instead opting for a strategic blend of cash and BTC.
“Perhaps the most effective way to acquire the most Bitcoin is not by purchasing the most Bitcoin right away,” Saylor commented.
CEO Phong Le stated that Strategy will pause additional Bitcoin purchases while the STRC remains below its $100 par value. As of July 31, the preferred stock was trading around $89.
Between July 20 and July 24, Strategy repurchased approximately $25 million of STRC and raised $544 million through common stock sales. These measures indicate that management views support for the preferred shares as crucial for the broader capital-raising strategy.
Restoring STRC to par value could enhance investor confidence in Strategy’s preferred securities and support more efficient future issuances. These instruments are integral to the company’s capital-raising strategy, independent of common-share sales or traditional debt.
Strategy also maintained a cash reserve of $3.75 billion, allowing it to meet dividend and interest obligations without liquidating Bitcoin during market downturns.
MSTR chart shows weak momentum around $90
The daily chart shows Strategy stock trading near the lower end of its recent range. Thursday’s decline brought the price below the Bollinger Band midpoint of $96.04, edging closer to the lower band at $90.31.
A daily close below $90.31 could indicate renewed selling pressure, risking a retest of the late June low around $81 to $82, which was the stock’s bottom before stabilizing in July.
The Average Directional Index (ADX) recorded at 13.13 suggests a lack of strong directional trends, indicating that Strategy shares remain in a consolidation phase despite recent bearish activity.
Conversely, MSTR would need to surpass the $96.04 midpoint for a sustained uptrend, which could bring the upper Bollinger Band at $101.77 into play.
The narrow gap between the bands suggests that volatility has decreased since the stock’s sharp drop from May’s peak near $200. A breakout from the range of $90.31–$101.77 could establish the next short-term movement.
Wall Street analysts maintain a positive outlook for Strategy
Benchmark has reaffirmed its buy rating for Strategy, though it has adjusted its price target down from $570 to $435. Analyst Mark Palmer noted that Saylor’s focus on restoring STRC to par could enhance the company’s capability to secure funds for future Bitcoin purchases.
H.C. Wainwright has also retained a buy rating and set a target price of $325 for Strategy stock, citing the company’s cash reserves and STRC buybacks as efforts to improve its balance sheet and lessen the need for further debt.
Both targets indicate significant upside potential from the closing price on July 31, though their projections remain closely tied to Bitcoin’s performance and Strategy’s ability to issue securities under favorable conditions.
For U.S. investors, MSTR serves as a publicly traded option to gain leveraged exposure to Bitcoin without owning the asset directly. However, this exposure carries company-specific risks, including obligations associated with preferred shares, equity dilution, and earnings variability caused by Bitcoin’s fair-value adjustments.
Bitcoin and STRC are crucial for future growth
The short-term stock performance of Strategy is likely to depend on whether STRC recovers to $100 and if Bitcoin rises above the company’s average acquisition cost.
Management’s choice to conserve cash does not represent a withdrawal from its Bitcoin strategy; rather, it defers immediate purchases to reinforce the securities employed for financing future acquisitions.
MSTR may stay range-bound while the ADX remains low. A close below $90 would reinforce the bearish outlook, while a recovery above $101.77 would indicate increasing buyer strength.
Disclosure: This article is not intended as investment advice. The content and materials presented on this page are for educational purposes only.
